A Different Powell Emerges: Fed Chair Softens Hawkish Tone On Interest Rates, Bitcoin

It wasn't the same Fed Chair Jerome Powell who shook markets in December with a hawkish stance that unsettled investors. The version that appeared at the Fed's January press conference was far more measured, cautious, and seemingly at ease with the path ahead.

Powell sidestepped the brewing clash over interest-rate policy sparked by President Donald Trump, opting to let time and economic data shape the Fed's path ahead.

Notably, he didn't rule out Bitcoin BTC/USD being adopted by commercial banks, marking a sharp U-turn from his previously allergic stance on crypto-related matters.

While the Federal Reserve’s decision to hold rates at 4.25%-4.50% was widely expected, Powell delivered remarks that helped stabilize investor sentiment in a volatile week shaken by the DeepSeek news.

Here’s what happened at the January’s press conference.

Not In A Hurry To Ease, But Let’s See How Things Evolve…

Powell signaled patience but not outright resistance to future cuts.

"If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer," he said, while also indicating that weaker labor market conditions or faster-than-expected disinflation could warrant easing.

Notably, he indicated that recent inflation data has been encouraging.

"We don't overreact to two good readings or two bad readings, but nonetheless, the last couple of readings have suggested more positive progress," Powell said. “The expectation is that we will make continued progress.”

Powell described monetary policy again as “meaningfully restrictive,” a shift from December when he suggested rates were nearing neutral and a new phase of policy had begun.

When asked if a March rate cut was still on the table, Powell kept his response ambiguous: "We don't need to be in a hurry to adjust our policy stance."

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Powell Avoided Political Landmines, Downplays DeepSeek Macro Risk

When asked about President Donald Trump's demand for immediate rate cuts, Powell refused to engage. "I've had no contact," he said, adding, "It's not appropriate for me to comment on what the president said."

Tesla Inc. TSLA and SpaceX CEO Elon Musk also took aim at the Fed, calling it "absurdly overstaffed."

Powell dismissed the criticism, saying, "We run a very careful budget process. We’re fully aware that we owe that to the public, and we believe we do that."

When pressed on Trump's pledge to fight inflation by lowering energy costs, Powell again sidestepped. "I’m not going to react or discuss anything that any elected politician might say," he said.

When questioned on whether the recent AI-related stock volatility triggered by DeepSeek signaled any concerns about financial conditions, Powell downplayed its macroeconomic significance.

"What really matters for us is macro developments and substantial changes in financial conditions that are persistent for a period of time. So I wouldn't put that label on these events, although of course, we're all watching it with interest."

Bitcoin No Longer Off The Table? Powell's Evolving View On Crypto

One of the more surprising moments of the press conference came when Powell addressed Bitcoin and the broader cryptocurrency market. In stark contrast to his historically crypto-skeptical stance, Powell didn't dismiss the idea of banks integrating digital assets.

"Banks are perfectly able to serve crypto customers as long as they understand and can manage the risks," Powell said, marking a significant shift from his previous concerns over financial stability.

He indicated that the regulatory threshold for banks engaging in crypto activities has been higher due to the nascent nature of the industry, but he stopped short of opposing its role in the financial system.

Powell also voiced support for greater regulatory clarity. “I do think it would be helpful if there were a greater regulatory apparatus around crypto, and I think that’s something Congress was working on quite a lot.”

Final Takeaway: Powell Adapts, But Stays Cautious

Powell appeared to have learned a key lesson: hawkish surprises can wreak havoc on markets.

His shift in tone from December was evident—less hawkish, more cautious, but still noncommittal on rate cuts.

At the same time, Powell stood firm on the Fed's independence, dodging political pressure from both Trump and Musk.

Beyond monetary policy, Powell's measured stance on Bitcoin signaled a departure from his previous skepticism. While he didn't offer an outright endorsement, his willingness to acknowledge crypto's role in the financial system was a notable shift.

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